Federal milk marketing orders regulate minimum dairy farmer prices and many (but not necessarily all) milk handlers in a defined market area. Fluid milk processors selling into a regulated market area must be regulated, and other types of handlers often have incentives to be regulated under the order. At the present time, there are ten federal orders. California, the number one dairy state, is regulated by a state rather than a federal order, but the intent and structure are quite similar.
A main purpose of a federal order is to regulate the terms of trade between dairy farmers and milk buyers. There are many stated (but often somewhat vaguely defined) reasons for this regulation, including improving dairy farmer and cooperative bargaining power, improving equity among farmers for milk price received, limiting competition that would be detrimental to efficient milk marketing, and assuring consumers of an adequate supply of fluid milk. Federal orders are created (and amended) only with the approval of dairy farmers after a process that includes a public hearing, the publication of the proposed regulations, and a majority vote of the dairy farmers who will be regulated under a particular order.
Chuck Nicholson, Cornell Program on Dairy Markets and Policy
